Health care Reform Implementation-A Pragmatic View of the Affordable Care Act
This article addresses the implementation of the medical insurance
mandate under the Affordable Care Act of 2010, which will be implemented next
year. Federal insurance purchasing subsidies, health insurance exchange plan
design, and tax penalty information is highlighted for businesses and
individuals.
Small businesses with less than twenty-five employees who meet certain
criteria are eligible to receive federal subsidies to purchase health insurance
for their employees. One of the criteria is an average wage of $50,000 or less
for the entire workforce in determining any federal subsidy for insurance.
How much is the subsidy?
Only employer sponsored health plans with an actuarial value of 60% or
higher will be eligible to receive the tax credit subsidies, so this is
important information for small businesses who are considering starting or modifying
their health insurance plans. Also, if the employee’s share of the premium
would exceed 9.5% of their income that makes them eligible for a federal tax
credit subsidy. So there are two ways an individual may qualify for a federal
subsidy to buy insurance through their employer, either through the plan design
or the income level of the individual.
Penalties for Noncompliance
The penalty is $2,000 times the number of employees less
thirty employees.[1]
So, this means employers with fewer than thirty would not have a tax penalty.
Also, $2,000 is less than half of what it would cost for a typical employer to provide
medical insurance for a single employee, so some employers may still choose to
opt out of the mandated coverage. The Kaiser Family Foundation has a nice
algorithm of the PPACA and employer impact on their insurance reform web site.
Individuals
Government Assistance to Purchase Medical Insurance
You will be eligible for a government subsidy to purchase medical
insurance if your income falls within 133% of the poverty thresholds, which are listed
below for 2012. The government subsidy is 98% of the health insurance premium,
which will be based on a Blue Cross Blue Shield calculation each year for people who fall within this threshold.
Single individuals- No more than
$14,856
Individual plus one dependent- $20,123
Individual plus two dependents- $25,390
Individual plus three dependents- $30,657
Individual plus four dependents- $35,923
Individual plus five dependents- $41,190
Individual plus six dependents- $46,457
Individual plus seven dependents- $51,724
If your income is within 250% to 400% of the federal poverty level, the
government subsidy, via a tax credit will be roughly equal to 93.7% to 90.5% of
the national Blue Cross Blue Shield annual health insurance premium calculation. Here is what those income
thresholds were in 2012:
Individual plus one dependent- $ 80,492
Individual plus two dependents- $101,559
Individual plus three dependents- $122,628
Individual plus four dependents- $143,693
Individual plus five dependents- $164,760
Individual plus six dependents- $185,828
Individual plus seven dependents- $206,895
Insurance Exchange Coverage
For those whose income is within 250% of the annual federal poverty
calculation, they will also have a cap on the total amount per year that the individual
is expected to pay for health care, based on a government formula. For example, if your income falls within 100% to 200% of the federal poverty
limits, then the total amount for which you are responsible for health care
costs within your insurance plan is reduced by 66%. The thought here is someone
who is of low income will not be able to access health care services if their
out-of-pocket expenses are too high. This is also a concern for middle class
people, which is why the government has also limited the maximum out of pocket
charges for those who are within 400% of the federal poverty level as well.
This subsidy impacts only those plans offered through the federal insurance
exchanges. Using 2012 figures, a family within 150% of the poverty level would
have a maximum for total out of pocket expenses for the year of $3,963,
including co-payments and premiums.
Penalties for Not Purchasing
Insurance
For individual tax payers who do not obtain medical insurance and
submit proof with their income tax return, a monetary penalty will be assessed.
Though there are no civil penalties associated for failure to obtain the
insurance, failure to file income taxes can be considered tax evasion and is
prosecuted as a crime in the United States. For those who are considering not
obtaining health insurance, be prepared to pay the fine. The penalty will start
at $95 per year and increase to $695 by 2016 for individuals.
Impact on Larger Businesses
Businesses which have ERISA exempt health and welfare trust plans AKA
which are self-insured, will not have to comply with much of the insurance
reforms as their plans are already exempted, however the limitations on
pre-existing condition waiting periods and extension of coverage for adult
children provisions do apply to these plans. Larger businesses will do what they
have always done, which is using their broker/consultant to scout around and
figure out ways to tweak their plans to meet budget.
For more information on the healthpolicymaven’s analysis of the Patient
Protection and Accountable Care Act, please look for Unraveling U.S. Health
Care-A Personal Guide, this summer. You can read more about the book and its
reviews on Rowman & Littlefield Publishing Group’s web site by following
this link: https://rowman.com/ISBN/9781442222984
And this is the healthpolicymaven signing off.
